How to build credit as a college student

Whether you’re trying to lease your apartment or get a loan for a new car, credit matters. And establishing good credit is part of reaching those goals. If you can start building credit as a college student, you could be in a better position to take those next steps by the time you leave school. 

Key takeaways

• College students can establish and build credit over time through good financial habits and by using credit responsibly.
• A student credit card or secured credit card can be a good option for young adults who are working to establish credit.
• Monitoring your credit scores and credit reports can also help you understand where you stand and how to improve your credit scores.

Here are several ways you could start building credit as a college student:

Building financial literacy and good financial habits can help prepare you to build credit. Especially because certain habits, like spending responsibly and paying bills on time, are key factors in building good credit.

Looking for a first step? Start with setting up a budget. A budget can help you get a clear picture of how much you’re able to spend each month and where your money’s going. The U.S. Department of Education has advice on how students can create a budget. 

Just remember that sticking with your college budget is just as important as making one. And learning to manage your money is a useful skill no matter what. Plus, it can also help prepare you for the responsibility of having a credit card.

Before applying for a credit product, it’s important to understand what affects your credit scores. Credit scoring models from FICO® and VantageScore® may weigh each factor differently. But they share some common features, including the most important factors:

• Payment history: Late payments can harm your credit scores.
• Debt and credit utilization: How much debt you have and the percentage of your available credit you use across all your accounts impacts your credit scores. 
• Credit age: The older the length of your credit history is, the better it is for your credit scores.
• Credit mix: This is the different types of credit you have. Managing both installment loans and revolving credit responsibly is a positive indicator to potential lenders. 
• New applications: Your credit scores may decrease if you apply for or open a lot of accounts in a short period of time. The effects of a single hard inquiry may be temporary. But the Consumer Financial Protection Bureau (CFPB) still recommends applying only for the credit you need.

Understanding what factors affect your credit scores can help you identify which areas you can improve as you work toward a good credit score as a college student.

Credit cards are one tool you can use to build credit. But that’s only when they’re used responsibly. As a college student, you may not have an established credit history. And that can make it harder to get approved for a credit card. But that doesn’t mean there aren’t options:

• A student credit card is usually an accessible first credit card for young adults. They typically require little credit history and sometimes offer rewards.
• A secured credit card requires an upfront deposit to back the account. A secured card may be an option if you have trouble qualifying for an unsecured credit card.

But before you use a credit card to build credit, make sure it’s the right choice for you. Because using a credit card irresponsibly could have long-term negative consequences for your credit.

Feel ready for a card but can’t qualify for one of your own right now? You could ask a trusted family member or friend to make you an authorized user on one of their credit card accounts. 

Some credit card issuers report the card activity of authorized users to the credit bureaus, which then include that information on credit reports. That can help you start to build credit. But be aware that if the information doesn’t appear on credit reports, it can’t help.

It could help to be sure that you and the primary cardholder agree on what you expect of each other. And keep in mind that irresponsible use of the account by either of you—for example, spending over the account’s credit limit or making late payments—could damage their credit and yours.

It’s not simply having a credit card that helps you build credit. It’s what you do with it. If you use your card responsibly, you can start building good credit over time. Here are four ways the CFPB says you can do that:

• Use only the credit you need. Your credit scores may suffer if you apply for or open a lot of accounts in a short period of time.
• Pay on or before the due date. If you pay even one day late, it could mean late fees and interest charges. To help you pay on time, you could set up automatic payments or electronic reminders.
• Try not to carry a balance. Paying off your balance each month will help you avoid paying interest.
• Keep an eye on your credit utilization ratio. The CFPB says not to use more than 30% of your available credit.

If you have student loans, they can also help you establish and build your credit history. That’s because the amount you borrow for student loans, as well as your repayment history, will show up on your credit report. 

Many federal student loans don’t need to be repaid until at least six months after college. But there are benefits to making small, regular payments while still in school. Doing so can help establish payment history and reduce the overall cost of the loans.

Here are some more tips on paying off student loans.

Once you’ve established credit, you can start monitoring your progress by checking your credit reports. Checking your reports regularly can help you spot areas to improve as well as any inaccuracies, which could drag down your scores.

You can get a free annual copy from the three major credit bureaus, Experian®, Equifax® and TransUnion®, through AnnualCreditReport.com. 

But if you’d like to monitor more frequently, consider signing up for CreditWise from Capital One. This tool can be especially helpful for students. You have unlimited access to your credit score and tools to help you monitor your credit profile. Plus, it’s free and available to anyone, whether or not you have a Capital One card.

With time, patience and the right tips and tools, you can work toward building a strong credit profile, even during college. 

If you decide you’re ready for a credit card, a student credit card from Capital One could be a good pick. It allows you to build credit with responsible use while you’re in school and possibly earn rewards while you do it.